FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
              (As last amended in Rel. No. 34-26589, eff. 4/12/93.)

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1997


                         Commission file number: 0-12668


                              Hills Bancorporation


Incorporated in Iowa                              I.R.S. Employer Identification
                                                  ------------------------------
                                                           No. 42-1208067

                          131 MAIN STREET, HILLS, IOWA

                        Telephone number: (319) 679-2291


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  [X] Yes  [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practical date.

                                                              SHARES OUTSTANDING
          CLASS                                                AT JULY 31, 1997
--------------------------                                    ------------------

Common Stock, no par value                                         1,467,259

<PAGE>



                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION


                                                                           Page
                                                                          Number
                                                                          ------

Item 1.        Financial Statements

               Consolidated balance sheets, June 30, 1997 
                   (unaudited) and December 31, 1996                           
               Consolidated statements of income, (unaudited) for 
                   three and six months ended June 30, 1997 and 1996   
               Consolidated statement of stockholders' equity, 
                   (unaudited) for three and six months ended June 30, 
                   1997 and 1996  
               Consolidated statements of cash flows (unaudited) for 
                   three and six months ended June 30, 1997 and 1996  
               Notes to consolidated financial statements

Item 2.        Management's discussion and analysis of financial 
                   condition and results of operations  


                                     Part II
                                OTHER INFORMATION

Item 1.        Legal proceedings            

Item 2.        Changes in securities                          

Item 3.        Defaults upon senior securities            

Item 4.        Submission of matters to vote of security holders 

Item 5.        Other information                 

Item 6.        Exhibits and reports on Form 8-K   

COMPUTATION OF EARNINGS PER SHARE               

SIGNATURES                                
<PAGE>


                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
<TABLE>

                                                             June 30,
                                                               1997    December 31,
                                                             Unaudited    1996*
                                                             --------- ------------
<S>                                                          <C>       <C>    
ASSETS
Cash and due from banks ..................................   $ 17,807   $ 15,036
Investment securities:
   Available for sale (amortized cost
     June 30, 1997 $109,865;
     December 31, 1996 $109,495) .........................    109,995    110,537
   Held to maturity (fair value
     June 30, 1997 $24,271;
     December 31, 1996 $22,232) ..........................     24,063     22,098
Federal funds sold .......................................      1,712      1,107
Loans, net ...............................................    399,856    368,264
Property and equipment, net ..............................      8,349      8,409
Accrued interest receivable ..............................      5,396      4,884
Deferred income taxes, net ...............................      1,668      1,359
Other assets .............................................      7,924      7,758
                                                             --------   --------
                                                             $576,770   $539,452
                                                             ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits .............................   $ 51,947   $ 46,154
Interest-bearing deposits ................................    413,697    403,907
                                                             --------   --------
   Total deposits ........................................   $465,644   $450,061
Federal funds purchased and securities
   sold under agreements to repurchase ...................      6,084      6,071
Federal Home Loan Bank notes .............................     45,795     25,795
Accrued interest payable .................................      1,917      1,952
Other liabilities ........................................      2,120      1,822
                                                             --------   --------
                                                             $521,560   $485,701
                                                             --------   --------

REDEEMABLE COMMON STOCK HELD BY
   EMPLOYEE STOCK OWNERSHIP PLAN
   (ESOP) ................................................   $  6,897   $  6,416
                                                             --------   --------

STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
   authorized 10,000,000 shares;
   issued June 30, 1997- 1,467,259
   shares; issued December 31, 1996 -
   1,465,384 shares ......................................   $  9,042   $  8,997
Retained earnings ........................................     46,086     44,078
Unrealized gains (losses) on investment securities, net ..         82        676
                                                             --------   --------
                                                             $ 55,210   $ 53,751
Less, maximum cash obligation related to
   ESOP shares ...........................................      6,897      6,416
                                                             --------   --------
                                                             $ 48,313   $ 47,335
                                                             --------   --------
                                                             $576,770   $539,452
                                                             ========   ========
</TABLE>
*  Derived from audited financial statements.

See Notes to Financial Statements.
<PAGE>


                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                Three and Six Months Ended June 30, 1997 and 1996
                      (In Thousands, Except Per Share Data)
<TABLE>

                                                                 Three Months Ended       Six Months Ended
                                                                      June 30,                 June 30,
                                                                --------------------    --------------------
                                                                  1997        1996         1997        1996
                                                                --------------------    --------------------
<S>                                                             <C>         <C>         <C>         <C>   
Interest Income:
         Interest and fees on loans ....................        $  8,515    $  7,123    $ 16,556    $ 14,122
         Interest on investment securities
                  Taxable ..............................           1,693       1,478       3,366       2,896
                  Non-taxable  .........................             298         269         592         546
         Other interest income .........................              39         133          80         301
                                                                --------------------------------------------
         Total interest income .........................          10,545       9,003      20,594      17,865
                                                                --------------------------------------------
Interest Expense:
         Interest on deposits ..........................           4,719       4,253       9,322       8,496
         Interest on securities sold under
            agreements to repurchase ...................             109          67         198         167
         Interest on FHLB notes.........................             730         488       1,260         977
                                                                --------------------------------------------
         Total interest expense ........................           5,558       4,808      10,780       9,640
                                                                --------------------------------------------
         Net interest income ...........................           4,987       4,195       9,814       8,225
Provision for loan losses ..............................             395         180         590         360
                                                                --------------------------------------------
         Net interest income after provision
           for loan losses .............................           4,592       4,015       9,224       7,865
                                                                --------------------------------------------
Other income:
         Gain on disposition of marketable equity 
            security ...................................          1,054           --       1,054          --
         Real estate origination fees ..................             61           94         120         205
         Trust fees ....................................            321          223         625         408
         Deposit account charges and fees ..............            470          397         903         772
         Other fees and charges ........................            300          246         629         527
                                                                --------------------------------------------
Other expenses:
         Salaries and employee benefits ................          1,797        1,513       3,587       3,063
         Occupancy expenses ............................            241          207         487         419
         Furniture and equipment .......................            343          254         670         520
         Contributions .................................          1,073            1       1,092          18
         Office supplies and postage ...................            187          186         418         362
         Other operating ...............................            867          618       1,714       1,204
                                                                --------------------------------------------
                                                                  4,508        2,779       7,968       5,586
                                                                --------------------------------------------
         Income before income taxes ....................          2,290        2,196       4,587       4,191
Federal and state income taxes .........................            355          641       1,041       1,210
                                                                --------------------------------------------
         Net income ....................................        $ 1,935     $  1,555     $ 3,546     $ 2,981
                                                                ============================================

Per common share: Net income ...........................           1.31         1.05        2.40        2.02
                           Dividend, January ...........             --           --        1.05         .95
                           Weighted average
                             of common
                             outstanding stock .........      1,480,933    1,474,199   1,480,199   1,476,216
</TABLE>
See Notes to Financial Statements

<PAGE>



                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Six Months Ended June 30, 1997 and 1996
                                 (In Thousands)

<TABLE>

                                              Capital    Retained Unrealized    ESOP
                                      Total    Stock     Earnings   Losses   Obligations
                                    ----------------------------------------------------
<S>                                 <C>       <C>        <C>       <C>        <C>   

Balance, January 1, 1997 ........   $ 47,335  $  8,996   $ 44,079  $   676    $ (6,416)
Exercise stock options for 2,055
  shares ........................         53        53      - - -    - - -       - - -
Redemption of stock .............         (7)       (7)     - - -    - - -       - - -
Net income ......................      3,546     - - -      3,546    - - -       - - -
Change related to ESOP shares ...       (481)    - - -      - - -    - - -        (481)
Cash dividends ($1.05 per share)      (1,539)    - - -     (1,539)   - - -       - - -
Unrealized gains (losses) on
  debt securities, net ..........       (594)    - - -      - - -     (594)      - - -
                                    --------------------------------------------------
Balance, June 30, 1997 ..........   $ 48,313  $  9,042   $ 46,086   $   82    $ (6,897)
                                    ==================================================

Balance, January 1, 1996 ........   $ 43,277  $  8,925   $ 39,325   $  298    $ (5,271)
Net income ......................      2,981     - - -      2,981    - - -       - - -
Change related to ESOP shares ...       (531)    - - -      - - -    - - -        (531)
Cash dividends ($.95 per share) .     (1,391)    - - -     (1,391)   - - -       - - -
Unrealized gains (losses) on debt
  securities, net ...............       (816)    - - -      - - -     (816)      - - -
                                    --------------------------------------------------
Balance, June 30, 1996 ..........   $ 43,520  $  8,925   $ 40,915  $  (518)   $ (5,802)
                                    ==================================================
</TABLE>

See Notes to Financial Statements.




<PAGE>


                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 1997 and 1996
                                 (In Thousands)
<TABLE>

                                                                                      1997       1996
                                                                                   --------------------
<S>                                                                                <C>         <C>  

CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................................   $  3,546    $  2,981
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation ...............................................................        535         412
Provision for loan losses ......................................................        590         360
     Gain on disposition of marketable equity security .........................     (1,054)      - - -
    (Increase) decrease in accrued interest receivable..........................       (512)        (22)
    Amortization of bond discount ..............................................        189         266
    (Increase) in other assets .................................................       (337)        (37)
    Amortization of intangibles ................................................        171       - - -
    Increase in accrued interest and other liabilities .........................        263         150
                                                                                   --------------------
    Net cash provided by operating activities ..................................   $  3,391    $  4,110
                                                                                   --------------------

CASH FLOWS FROM  INVESTING  ACTIVITIES  Proceeds  from  maturities of investment
securities:
    Available for sale .........................................................   $  9,855    $  6,000
    Held to maturity ...........................................................      1,393       2,852
Purchase of investment securities
    Available for sale .........................................................     (9,315)    (12,321)
    Held to maturity ...........................................................     (3,393)     (2,474)
Federal funds sold, net ........................................................       (605)      6,118
Loans made to customers, net of collections ....................................    (32,182)     (9,495)
Purchases of property and equipment ............................................       (475)       (361)
                                                                                   --------------------
    Net cash (used in) investing activities ....................................   $(34,722)   $ (9,681)
                                                                                   --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits ........................................   $ 15,583    $ 10,301
    Net increase (decrease) in fed funds purchased and
       securities sold under agreements to repurchase ..........................         13      (4,953)
    Borrowings from FHLB .......................................................     20,000       - - -
    Stock options exercised ....................................................         52
    Redemption of common stock .................................................         (7)      - - -
    Dividends paid .............................................................     (1,539)     (1,391)
                                                                                   --------------------
       Net cash provided by financing activities ...............................   $ 34,102    $  3,957
                                                                                   --------------------
       Increase in cash and due from banks .....................................   $  2,771    $ (1,614)

CASH AND DUE FROM BANKS
    Beginning ..................................................................   $ 15,036      11,883
                                                                                   --------------------
    Ending .....................................................................   $ 17,807    $ 10,269
                                                                                   ====================

SUPPLEMENTAL DISCLOSURES Cash payments for:
       Interest paid to depositors and others ..................................   $  9,325    $  8,555
       Interest paid on other obligations ......................................      1,458       1,144
    Non-cash financing transactions:
       Increase in maximum cash obligation related
        to ESOP shares .........................................................        481         531
       Net unrealized gains (losses) on debt securities ........................       (913)       (816)
</TABLE>
See Notes to Financial Statements.
<PAGE>


                              HILLS BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


Note 1.   Interim Financial Statements

          Interim  consolidated  financial  statements have not been examined by
          independent   public   accountants,   but  include   all   adjustments
          (consisting only of normal  recurring  accruals) which, in the opinion
          of management,  are necessary for a fair  presentation  of the results
          for these  periods.  The results of operation for the interim  periods
          are not necessarily indicative of the results for a full year.

          For purposes of reporting cash flows, cash and due from banks includes
          cash on hand and  amounts  due from  banks  (including  cash  items in
          process of clearing).  Cash flows from demand deposits,  NOW accounts,
          savings  accounts,  and federal funds  purchased and sold are reported
          net since their original  maturities are less than three months.  Cash
          flows from loans and time  deposits are  presented as net increases or
          decreases.


Note 2.   Loans

          The  following  tables  set  forth  the  composition  of loans and the
          allowance for loan losses:

                                                            (In thousands)
                                                                June 30
                                                       -------------------------
                                                         1997             1996
                                                       -------------------------

Agricultural .................................         $ 24,630         $ 18,983
Commercial and financial .....................           31,101           26,501
Real estate, construction ....................           11,530            8,707
Real estate, mortgage ........................          306,149          248,745
Loans to individual ..........................           34,232           31,641
                                                       -------------------------
                                                       $407,642         $334,577
Less allowance for loan losses ...............            7,786            6,896
                                                       -------------------------
                                                       $399,856         $327,681
                                                       =========================

          Transactions in the allowance for loan losses are as follows:

                                                           (In thousands)
                                                              Six months
                                                            ended June 30
                                                       -------------------------
                                                        1997              1996
                                                       -------------------------

Balance, beginning ...........................         $ 7,311          $ 6,740
  Provision charged to expense ...............             590              360
  Net charge-offs ............................            (115)            (204)
                                                       ------------------------
Balance, ending ..............................         $ 7,786          $ 6,896
                                                       ========================


          The  following   summarizes  the  Company's   nonaccrual,   past  due,
          restructured and impaired loans:

                                                       (In thousands)
                                                         June 30
                                                     1997       1996
                                                    ------------------

Nonaccrual ....................................     $- - -     $  339
Accruing loans, past due 90 days or more ......        870        777
Restructured loan .............................      - - -      - - -
Impaired loans ................................      6,807      5,820
<PAGE>


Note 3.   Changes in Accounting Policies

          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  128,
          "Earnings  per  Share",  was  issued  in  February  1997  and  will be
          effective for the Company for periods  ending after  December 15, 1997
          and may not be adopted prior to such date. This statement  establishes
          standards for computing and presenting earnings per share. The Company
          expects to adopt SFAS No. 128 when required and management anticipates
          adoption of this statement will not have a material effect on earnings
          per share disclosures.

          In June 1997, the FASB issued Statement #130, "Reporting Comprehensive
          Income,"  and  Statement  #131,  "Disclosures  About  Segments  of  an
          Enterprise  and  Related  Information."   Statement  #130  establishes
          standards for reporting  comprehensive income in financial statements.
          Statement #131 expands certain  reporting and disclosure  requirements
          for segments from current standards.  The Statements are effective for
          fiscal years  beginning  after  December 15, 1997 and the Company does
          not expect the  adoption of these new  standards to result in material
          changes to previously reported amounts or disclosures

<PAGE>


                                 PART I, ITEM 2.
                              HILLS BANCORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF THE FINANCIAL CONDITION AND RESULTS OF OPERATION


The Hills Bancorporation consolidated balance sheet as of June 30, 1997 reflects
total  assets of $576.8  million,  which is an  increase of $37.3  million  from
December 31, 1996. Net loans are $399.9 million which  represents an increase of
$31.6  million  from  December  31, 1996.  These loan  increases  continue to be
primarily in the area of single family  residential  loans and some multi-family
housing units.  Deposits (when federal funds purchased and securities sold under
agreements  to  repurchase  are  included)  as of June 30, 1997  totaled  $471.7
million,  an increase of $15.6 million in six months.  Borrowings  from the FHLB
have  increased  from $25.8 million to $45.8 million  during the last six months
and these funds were used to fund the new loans.

Other significant balance sheet changes from June 30, 1996 to June 30, 1997 were
as follows:

Investment  securities  increase  $8.1 million to $134.1  million.  

Net loans at $399.9 million, an increase of $72.2 million.

Total  deposits,  including  securities  sold under  agreements  to  repurchase,
increased  from $407.6  million to $471.7  million  for a total  change of $64.1
million.

Borrowings from the Federal Home Loan Bank increased $15 million and these funds
were used primarily to fund residential home loans.

The addition of a location in Lisbon,  Iowa in July of 1996 and Kalona,  Iowa in
September,  1996 accounted for  approximately  $40 million of this asset growth;
$22 million in loans; $18 million in investment securities and other assets; and
approximately $40 million in deposit growth.

Significant  changes  in  the  balance  sheet  are  subject  to  asset-liability
management,  which  encompasses both the management of interest rate sensitivity
and the maintenance of adequate liquidity.  Interest rate sensitivity management
attempts to provide the optimal  level of net  interest  income  while  managing
exposure to risks associated with interest rate movements.  Liquidity management
involves  planning to meet anticipated  funding needs.  Management  monitors the
rate  sensitivity  and  liquidity  positions  on an  on-going  basis  and,  when
necessary,  appropriate action is taken to minimize any adverse effects of rapid
interest rate movements or any unexpected liquidity concerns.

In January  1997,  Hills  Bancorporation  paid a dividend of $1.05 per share,  a
10.52% increase from the $.95 paid in January 1996. Stockholders' equity at June
30, 1997 and December  31, 1996  reflects an  adjustment  for  unrealized  gains
(losses) on investment securities, net of income taxes. As of December 31, 1996,
the unrealized net gains on securities were $676,000 compared to $82,000 at June
30,  1997.  The major  reduction in  stockholders'  equity was the result of the
disposition  of an  appreciated  equity  security  to the  Hills  Bancorporation
Foundation.  Other  details  of this  transaction  is  discussed  in the  income
statement comment section.

The total  stockholders'  equity  of Hills  Bancorporation  as of June 30,  1997
(before  the  reduction  for the ESOP  shares) as a percent of total  assets was
9.57%.  Under risk-based capital rules, total capital is 15.10% of risk-adjusted
assets, compared to the current 8% requirement.

Net income for the  quarter  ended June 30,  1997  increased  $380,000  from the
previous year's quarter.  Net interest income increased  $792,000 and $1,589,000
for the quarter and the six months ended June 30, 1997 compared to the same time
period in 1996.  These  increases  are due to  significant  volume  increases in
average earnings assets which, as of June 30, 1997 compared to one year ago, had
grown approximately $62.9 million.  These increases are the results of increased
loan volume and the two acquisitions  discussed above. Due to the large increase
in net loans,  an  additional  $200,000  was  provided  for the reserve for loan
losses for the second  quarter of 1997. 

A  significant  other  transaction  in  the  second  quarter  of  1997  was  the
recognition  of $1,054,000 on the  disposition of a marketable  equity  security
held by Hills  Bancorporation.  The equity security was contributed to the Hills
Bancorporation   Foundation,   a  private   charitable   foundation,   organized
exclusively for charitable and  educational  purposes to benefit the communities
with bank offices. As a result of the stock contribution,  Hills  Bancorporation
recognized a gain of $1,054,000;  a contribution expense of the same amount, and
an income tax  savings  of  approximately  $340,000  which is  reflected  as tax
savings in the federal and state  income taxes  expense for the second  quarter.
The marketable  equity security was purchased several years ago as an investment
in a non-marketable  start-up  software  developer.  The stock became marketable
upon an initial public offering in late 1996.
<PAGE>


Excluding the gain on disposition of the marketable  equity securite,  all other
income items increased  $365,000 for the six months,  primarily due to trust fee
increases of $217,000,  which was the direct result of  additional  assets under
management  and  deposit  amount  charges  and fees  which  increased  $131,000.
Excluding the contribution of the marketable equity security, all other expenses
for the six months  increased  $1,328,000 and the major portion of this increase
was a $524,000  increase in salaries and employee  benefits as twenty seven full
time full-time  equivalent positions were added due to the new banks acquired in
1996 and new positions  added at Hills Bank in various  areas.  Other  operating
expenses  were  up  $510,000  as a  result  of  increases  in  marketing,  other
professional fees, and other data processing charges.


The  Bank's  principal  sources  of funds  continues  to be  prepayment  of loan
principal and current amortized loan payments.  In addition,  funds are provided
from current operations.  All of the funds are used to fulfill loan commitments,
make  short-term  investments,  and fund any  deposit  withdrawals  needed.  The
Company has no material  commitments or plans which will  materially  affect its
liquidity or capital resources. The acquisition of property and equipment may be
in cash purchases, or they may be financed if favorable terms are available.

Forward-looking  information  relating to the financial results or strategies of
the Company are referenced throughout  Management's Discussion and Analysis. The
following paragraphs identify forward-looking statements and the risks that need
to be considered when reading those statements.

Forward-looking  statements include such words as believe,  expect,  anticipate,
target,  goal,  objective  or other words with similar  meaning.  The Company is
under no obligation to update such forward-looking information statements.

The risks  involved in the  operations  and  strategies  of the Company  include
competition  from  other  financial  institutions,  changes in  interest  rates,
changes in economic or market  conditions  and changes in  regulations  from the
federal and state regulators. These risks, whch are not all inclusive, cannot be
estimated.
<PAGE>


                              HILLS BANCORPORATION

                          PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         There are no material pending legal proceedings.

Item 2.  Changes in Securities

         There were no changes in securities.

Item 3.  Defaults Upon Senior Securities

         Hills Bancorporation has not senior securities.

Item 4.  Submission of Matters to a Vote of Security Holders

         At the Annual Meeting held on April 21, 1997, the security holders
         approved the following:

         (a)  Elected Sheldon E. Yoder, D.V.M., to a one-year term to the Board
              of Directors expiring at the 1998 Annual Meeting.

         (b)  Elected Willis M. Bywater; Thomas J. Gill, D.D.S.; Donald H.
              Gringer; and Dwight O. Seegmiller to three-year terms to the 
              Board of Directors expiring at the 2000 Annual Meeting.

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibit

              See exhibit 11 - Statement Re Computation of Earnings Per Common
              Share

         (b)  Reports on Form 8-K

              No reports on Form 8-K have been filed during the quarter ended
              June 30, 1997.
<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned and thereunto duly authorized.

                                                  HILLS BANCORPORATION
                                                  (Registrant)



August 13, 1997                                  /s/ Dwight O. Seegmiller
---------------------------                      -------------------------------
Date                                             Dwight O. Seegmiller, President

                                                 (Duly authorized officer of the
                                                    registrant)



                                                 /s/ James G. Pratt
                                                 -------------------------------
                                                 James G. Pratt, Treasurer
                                                 (Principal Financial Officer)